Information  X 
Enter a valid email address

Gartmore Split Cap (GTB)

  Print      Mail a friend

Thursday 28 February, 2002

Gartmore Split Cap

Interim Results

Gartmore Split Capital Opps Tst PLC
28 February 2002

STOCK EXCHANGE ANNOUNCEMENT

GARTMORE SPLIT CAPITAL OPPORTUNITIES TRUST PLC
PRELIMINARY ANNOUNCEMENT OF INTERIM RESULTS
------------------------------------------

The Directors announce the Group's unaudited results for the six months from 1st
August 2001 to 31st January 2002.

FEATURES
--------

- TOTAL RETURN ON TOTAL ASSETS OF -20.2%

- TOTAL RETURN PER ORDINARY SHARE -34.0P

- EARNINGS PER ORDINARY SHARE 5.3P

- GSCOT SECURITIES PLC ZERO DIVIDEND PREFERENCE SHARES COVERED 0.7 TIMES FOR
  FULL REPAYMENT ON 1ST NOVEMBER 2004.

GROUP TOTAL RETURN
------------------

                                        SIX MONTHS TO 31st JANUARY 2002


                                                                                                      TOTAL
                                                                REVENUE           CAPITAL            RETURN
                                                                  £'000             £'000             £'000
INCOME AND CAPITAL PROFITS
  Dividends and other income                                      3,053                49             3,102
  Net loss on investments                                             -          (17,277)          (17,277)
                                                                 ------            ------            ------
RETURN BEFORE EXPENSES, FINANCE COSTS AND TAXATION                3,053          (17,228)          (14,175)
----------------------------------                           ----------
CONTINUING OPERATIONS:                                                  )
  Ongoing                                                         3,053 )
  Attributable to the acquisition                                       )
  of The Gartmore Scotland                                              )
  Investment Trust PLC                                                - )
----------------------------------                           ----------
EXPENSES
  Management fees                                                  (84)             (127)             (211)
  Other expenses                                                  (131)                 -             (131)

                                                                 ------            ------            ------
RETURN BEFORE FINANCE COSTS AND TAXATION                          2,838          (17,355)          (14,517)
----------------------------------                           ----------
CONTINUING OPERATIONS:                                                  )
  Ongoing                                                         2,838 )
  Attributable to the acquisition                                       )
  Of The Gartmore Scotland                                              )
  Investment Trust PLC                                                - )
----------------------------------                           ----------
FINANCE COSTS
  Interest payable                                                (264)             (396)             (660)
                                                                 ------            ------            ------
RETURN BEFORE TAXATION                                            2,574          (17,751)          (15,177)
TAXATION                                                          (133)               133                 -
                                                                 ------            ------            ------
RETURN AFTER TAXATION                                             2,441          (17,618)          (15,177)

NON-EQUITY MINORITY INTEREST                                        (-)             (425)             (425)
                                                                 ------            ------            ------
RETURN TO EQUITY SHAREHOLDERS                                     2,441          (18,043)          (15,602)


APPROPRIATED TO EQUITY SHAREHOLDERS
  Dividends - Ordinary shares                                   (1,376)                 -           (1,376)
                                                                 ------            ------            ------
TRANSFERRED TO/(FROM) RESERVES                                    1,065          (18,043)          (16,978)
                                                                 ------            ------            ------
TOTAL RETURN PER ORDINARY SHARE                                    5.3P           (39.3)P           (34.0)P
                                                                =======           =======           =======


                                       SIX MONTHS TO 31st JANUARY 2001


                                                                                                     TOTAL
                                                               REVENUE            CAPITAL           RETURN
                                                                 £'000              £'000            £'000
INCOME AND CAPITAL PROFITS
  Dividends and other income                                     3,959                  -            3,959
  Net loss on investments                                            -            (3,251)          (3,251)
                                                                ------             ------           ------
RETURN BEFORE EXPENSES, FINANCE COSTS AND TAXATION               3,959            (3,251)              708
----------------------------------                           ---------
CONTINUING OPERATIONS:                                                 )
  Ongoing                                                        2,869 )
  Attributable to the acquisition                                      )
  of The Gartmore Scotland                                             )
  Investment Trust PLC                                           1,090 )
----------------------------------                           ---------
EXPENSES
  Management fees                                                (284)              (124)            (408)
  Other expenses                                                 (209)               (13)            (222)

                                                                ------             ------           ------
RETURN BEFORE FINANCE COSTS AND TAXATION                         3,466            (3,388)               78
----------------------------------                           ---------
CONTINUING OPERATIONS:                                                 )
  Ongoing                                                        2,653 )
  Attributable to the acquisition                                      )
  Of The Gartmore Scotland                                             )
  Investment Trust PLC                                             813 )
----------------------------------                           ---------
FINANCE COSTS
  Interest payable                                               (273)              (410)            (683)
                                                                ------             ------           ------
RETURN BEFORE TAXATION                                           3,193            (3,798)            (605)
TAXATION                                                         (139)                139                -
                                                                ------             ------           ------
RETURN AFTER TAXATION                                            3,054            (3,569)            (605)

NON-EQUITY MINORITY INTEREST                                     (311)            (2,583)          (2,894)
                                                                ------             ------           ------
RETURN TO EQUITY SHAREHOLDERS                                    2,743            (6,242)          (3,499)


APPROPRIATED TO EQUITY SHAREHOLDERS
  Dividends - Ordinary shares                                  (2,638)                  -          (2,638)
                                                                ------             ------           ------
TRANSFERRED TO/(FROM) RESERVES                                     105            (6,242)          (6,137)
                                                                ------             ------           ------
TOTAL RETURN PER ORDINARY SHARE                                   6.0P            (13.6)P           (7.6)P
                                                               =======            =======          =======

NOTES:

The revenue return per Ordinary Share has been calculated on the return to
equity shareholders of £2,441,000 (2001: £2,743,000) and 45,877,600 (2001:
45,877,600) Ordinary shares in issue throughout the period.

The capital return per Ordinary Share has been calculated on the negative return
of £18,043,000 (2001: £6,242,000).

The total return per Ordinary Share has been calculated on the negative return
of £15,602,000 (2001: £3,499,000).

The Revenue column shown above represents the Revenue Account of the Group.

Management fees and finance costs of Gartmore Split Capital Opportunities Trust
PLC are allocated 40% to revenue and 60% to capital.

All revenue is derived from continuing operations.


GROUP BALANCE SHEET                                                                       AT                AT
--------------------                                                                31-01-02          31-07-01
                                                                                       £'000             £'000
FIXED ASSETS
  Listed investments at valuation                                                     52,806            70,274

CURRENT ASSETS
  Debtors: Amounts receivable within one year                                            844               644
  Cash at bank                                                                         1,785             3,789
                                                                                     -------           -------
                                                                                       2,629             4,433
  Creditors: Amounts payable within one year                                           (180)           (2,899)
                                                                                     -------           -------
NET CURRENT LIABILITIES                                                                2,449             1,534
                                                                                     -------           -------
TOTAL ASSETS, LESS CURRENT LIABILITIES                                                55,255            71,808


Creditors: Amounts payable after more than
  one year                                                                          (19,200)          (19,200)
                                                                                     -------           -------
NET ASSETS                                                                            36,055            52,608
                                                                                     =======           =======
CAPITAL AND RESERVES
Called-up share capital                                                                  459               459
Special reserve                                                                       42,509            42,509
Other reserves:
  Capital reserve                                                                   (12,115)           (8,516)
  Unrealised depreciation of investments                                            (33,220)          (18,776)
Revenue reserve                                                                        2,367             1,302
                                                                                     -------           -------
EQUITY SHAREHOLDERS' FUNDS                                                                 -            16,978
Non-equity minority interest                                                          36,055            35,630
                                                                                     -------           -------
CAPITAL EMPLOYED                                                                      36,055            52,608
                                                                                     =======           =======

NET ASSET VALUE PER SHARE:
ORDINARY SHARES                                                                            -             37.0p
GSCOT SECURITIES PLC
ZERO DIVIDEND PREFERENCE SHARES                                                       112.8p            111.4p




The Net Asset Value Per Ordinary Share is calculated on net assets of £nil (31st
July 2001: £16,978,000) and 45,877,600 Ordinary Shares in issue at the balance
sheet date (31st July 2001: 45,877,600)

GROUP CASH FLOW                                                               Six months to     Six months to
-----------------                                                                  31-01-02          31-01-01
                                                                                      £'000             £'000
OPERATING ACTIVITIES
Net dividends and interest received from investments                                  3,089             3,806
Interest received on deposits                                                            47               112
Other income                                                                              -                11
Expenses paid, allocated to revenue                                                   (215)             (594)
Expenses paid, allocated to capital                                                   (126)             (138)
                                                                                    -------           -------
                                                                                      2,795             3,197
                                                                                    -------           -------
SERVICING OF FINANCE
Interest paid                                                                         (661)             (682)
Dividends paid                                                                      (2,637)           (2,523)
Dividends paid to minorities                                                              -             (371)
                                                                                    -------           -------
                                                                                    (3,298)           (3,576)
INVESTMENT ACTIVITIES
Acquisition of investments                                                         (11,495)          (25,289)
Disposal of investments                                                               9,994            28,855
                                                                                    -------           -------
                                                                                    (1,501)             3,566
                                                                                    -------           -------

NET CASH (OUTFLOW)/INFLOW                                                           (2,004)             3,187
                                                                                    -------           -------

Reconciliation of Net Cash Outflow to Movement

In Net Debt
Balance brought forward                                                               3,789             3,907
Net Cash Inflow                                                                     (2,004)             3,187
                                                                                    -------           -------
Balance at 31st January                                                               1,785             7,094
                                                                                    -------           -------

The Group accounts shown above comprise the unaudited results of the Company and
its subsidiaries, GSCOT Securities PLC, for the six months to 31 January 2002,
and does not constitute statutory accounts under the Companies Act 1985. Full
statutory accounts for the period to 31 July 2001 included an unqualified audit
report and were filed with the Registrar of Companies on 8th November 2001.


CHAIRMAN'S STATEMENT

For the six months to 31st January 2002

CHAIRMAN'S STATEMENT

Performance

In the six months to 31st January 2002 the total return on the Company's assets
was -20.2%. During this period, the value of the Company's portfolio of income
shares fell by 25.2% in total return terms. While a fall of this size is clearly
very disappointing it reflects the overall performance of the split capital
investment trust income share sector, which fell by 23.9%, as measured by the
HSBC Income Share Index. The total return on the equity portfolio was -6.1%,
which compares with a fall of 5.3% on the FTSE All-Share Index. The difference
between the performance of the equity portfolio, which comprises just over
one-third of assets, when compared to the larger income share portfolio, bears
out the Board's decision in July 2001 to retain the equity investments received
as a result of the in specie transfer of assets following the wind-up of the
Company's former subsidiary, The Gartmore Scotland Investment Trust.

Ordinary Shares

As a result of the fall in value of the Company's assets there is currently no
asset value attributable to the Ordinary shares. The mid-market closing price of
the Ordinary Shares fell by 51.6% to 26.5p over the six  month period.

Zero Dividend Preference Shares

The net asset value of the Zero Dividend Preference Shares, issued by GSCOT
Securities, the Company's subsidiary, rose by 1.3% to 112.8p, whilst the
mid-market closing price of the Zeros fell by 47.8% to 53.0p. The sharp fall in
the zero share price reflects very poor investor sentiment towards zeros that
derive from companies, such as our own, which have high levels of investments in
other companies from the split capital sector. At 31st January 2002, the final
Zero entitlement of 149.35p per share, which is due to be paid by shareholders
on 1st November 2004, was covered 0.7 times by the Company's assets. This means
that the total assets need to grow by 10.1% per annum between 31st January 2001
and the Zero payment date for the full entitlement to be met.

Dividends

Following the payment of a first interim dividend of 3.0p per Ordinary Share,
the Board of Directors has suspended payment of a second interim dividend, due
to be paid on 31st March 2002. The suspension of the dividend was necessary
because the Company failed to satisfy the requirements of the 'Net Asset Test',
set out in Section 264 of the Companies Act 1985, as it had insufficient Net
Assets at 31st January 2002.

Income

Although no dividends currently can be paid, the income on the Company's
investments continues to accrue for the benefit of the shareholders.

Outlook

In accordance with the provisions of s142 of the Companies Act 1985 the Company
held an Extraordinary General Meeting (EGM) on 18th February 2002. As noted in
the EGM statement the Board is working with its advisers to try to bring
proposals to shareholders that will include the resumption of dividend payments
to Ordinary Shareholders at an appropriate level, while also safeguarding the
interests of the Zero Dividend Preference Shareholders. I will be writing in due
course with any proposals. These are likely to require the consent of both sets
of shareholders.

MANAGER'S REVIEW

Background

During the six months under review, there has been further pronounced weakness
in the income share market. A number of split capital investment trusts have
been forced to restructure and suspend dividend payments as the impact of equity
market weakness combined with a highly geared capital structure has caused them
to breach banking covenants. This has further undermined investor sentiment
towards the income share sector and market liquidity is consequently very poor.

The Company's income share portfolio mainly comprises geared ordinary income
shares, which have performed poorly in a falling UK equity market. To put this
into context, as at 31st January 2002, the FTSE 100 Index stood at 5164.8, a
decline of 25.5% from its peak of 6930.2 at 31st December 1999. In this severe
bear market, geared instruments, such as income shares, have unsurprisingly
suffered very badly.

During the early months of the review period, the UK equity market continued to
weaken, particularly in the aftermath of September's terrorist attacks on the US
as investors became convinced that the US economy was heading for recession. In
particular, technology, media and telecoms (TMT) stocks experienced sharp falls
amid continuing concerns about the deteriorating earnings outlook. In contrast,
investors favoured defensive sectors such as tobacco and beverages given their
non-cyclical nature. During the fourth quarter, the market rallied as investors
chose to look through the difficult economic backdrop and focus on the prospects
of a recovery in global economic activity during 2002. At the sector level, this
was reflected by out-performance of more cyclical stocks, including TMTs, and
smaller companies.

Portfolio

The Company's investment process seeks to identify those income shares that not
only offer the prospect of a high and growing income, but also the best scope
for capital growth. This will naturally lead to a focus to the greatest extent
possible on income shares from split capital trusts that have lower than average
portfolio yields, a relatively conservative capital structure and fund managers
with proven track records. A number of these split capital trusts, such as
Edinburgh Income & Value, Edinburgh High Income, and Investec Extra Income,
invest predominantly in UK equities, with a bias towards higher yielding
blue-chip stocks which have performed relatively well over the year under
review. More specifically, they have focused on more defensive areas such as
utilities, tobacco, and beverages, and have held greater exposure to domestic
cyclical sectors such as construction and retailers. As a result, the net asset
value of these split capital trusts has held up relatively well, although their
share prices have been depressed by poor investor sentiment towards the sector.

Nevertheless, the Company's income share portfolio has not been immune to the
difficulties of the split capital investment trust sector. Approximately 10% of
the Company's total assets are invested in income shares that have over 50% of
their underlying portfolio invested in the income shares of other split capital
trusts. These split capital trusts have encountered the most problems from
pronounced equity market weakness and high gearing. A small number of these
holdings have been forced to suspend dividend payments, while others have
announced dividend cuts.

Following the wind-up of the Company's former subsidiary, The Gartmore Scotland
Investment Trust, it was decided to retain the equity investments received as a
result of the in specie transfer. Bearing in mind the difficult market
environment for income shares, and the deteriorating global economic background,
we believed it was more prudent to continue investing in blue chip UK equities
at a time when investors were becoming increasingly risk-averse. Over the last
six months, this has benefited the Company's relative performance as the value
of the direct equity portfolio has held up relatively well. We have continued to
invest in a range of defensive, blue chip stocks in view of the uncertain
earnings background. Purchases included drinks group Diageo and tobacco company
Gallaher. We also acquired cyclical stocks on a selective basis, purchasing
housebuilder Persimmon and Corus (formerly British Steel).

Outlook

The UK economy has remained relatively robust in the wake of the US economic
downturn, as growth has been underpinned by the strength of the consumer sector
with interest rates at their lowest level since 1964. This has effectively
provided an opportunity for companies to refocus and put through painful
cost-cutting measures. However, the knock-on effect through the labour market,
with the prospect of interest rate rises later in the year, may begin to
undermine consumer sentiment. Nevertheless, the UK equity market has now largely
discounted the poor near-term outlook for corporate earnings. Looking further
out, corporate restructuring combined with a recovery in global economic growth
should pave the way for a significant rebound in profitability and underpin
equities.

By their very nature, geared income shares, which comprise the majority of the
Company's assets, are particularly sensitive to broader market movements. A more
positive longer-term outlook for UK equities should begin to work in favour of
many of these income shares, particularly those split capital trusts with the
better quality underlying portfolios.

INTERIM REPORT
----------------

The Interim Report of the Group for the period to 31st January 2002 will be
posted to shareholders shortly. Copies will be available from the registered
office of the Company: Gartmore House, 8 Fenchurch Place, London EC3M 4PB.

GARTMORE INVESTMENT LIMITED
28TH FEBRUARY 2002



                      This information is provided by RNS
            The company news service from the London Stock Exchange
                                                                                                                                                                                                                                             

a d v e r t i s e m e n t